Please ensure Javascript is enabled for purposes of website accessibility

Why Tiny Organovo Is Giving Money to Huge Biotech Amgen

By Keith Speights - Aug 30, 2017 at 3:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Organovo is paying Amgen researchers for their ideas on studying 3D bioprinted tissues. It could be money well spent.

In the first half of 2017, Amgen (AMGN -0.74%) paid out 140 times more in dividends to its shareholders than Organovo Holdings (ONVO 0.34%) made in revenue -- during its entire history as a company. Of course, Amgen's market cap stands north of $120 billion, while Organovo's market cap is barely over $200 million. That kind of stark difference is to be expected.

But just a few days ago, Organovo announced that it was giving money to researchers at Amgen. Why is the tiny 3D bioprinting company handing over cash to a huge biotech that doesn't need the money? 

Hand in white sleeve holding money on one end with hand in dress shirt and coat holding other end

Image source: Getty Images.

More to the story

There are a few important details to note about Organovo giving money to Amgen. Organovo established the ExVive 3D Tissue Application Award to foster exploration of new applications of its 3D bioprinted liver and kidney tissues. The company had many applications for the award. Researchers at Amgen and at privately held biotech Medikine were the winners. Organovo stated that the Amgen and Medikine teams submitted "the two most creative and novel proposals with the aim of bridging preclinical and clinical research." 

Taylor Crouch, Organovo's CEO, said the grant program allows his company to "work closely with partners to design 3D tissue solutions in vital areas of high-value drug profiling." Organovo will perform the proposed projects itself in collaboration with the two winners. According to Crouch, Organovo benefits by being able to support the increased demand for translational in vitro models that appeal to a broader customer base.

But Amgen and Medikine stand to win also. Cindy Afshari, Amgen's vice president of comparative biology and safety sciences, said that her company makes considerable efforts to develop better in vitro models that can predict potential safety issues during pre-clinical testing of an investigational drug. Afshari explained that "current in vitro models lack the sensitivity to detect drug-induced fatty liver, a common reason drugs fail in clinical development, due to a variety of technical limitations." 

Medikine chief scientific officer Bill Dower expressed a particular interest in the potential for Organovo's 3D bioprinted kidney tissues. Dower thought that Organovo's Exvive kidney tissue was an "excellent tool to study progression and reversal of fibrosis because of its multicellular nature."      

Organovo's challenge

Interest appears to be high among biopharmaceutical companies for Organovo's technology. However, some potential customers also seem to be taking a "show me" stance.

Earlier this year, Organovo slashed its guidance for fiscal year 2017 as a result of requests for additional validation studies by several customers. Organovo has achieved some successes in the past with presentations and public data. However, those weren't enough for some customers.

Human liver tissue

Human liver tissue. Image source: Getty Images.

The company is moving forward with the validation studies necessary to win more orders. Organovo's research and development spending in its latest quarter rose 13% year over year in large part because of those studies. That should be money well spent if the studies help demonstrate the effectiveness of its 3D tissues.

While not directly related to the validation studies requested by customers, the awarding of grants to Amgen and Medkine could eventually help Organovo in making its case for the value of its kidney and liver tissues. Once the company can convincingly show that its products help accelerate the drug discovery process, allowing drugs to be developed faster and more inexpensively, Organovo could have customers lining up to place orders.  

A future Amgen?

It can be hard at times to remember that Amgen was once a small company struggling to make its way like Organovo is today. As profitable as the big biotech is now, Amgen started out losing a lot of money. It also worked hard to forge relationships with larger organizations -- just like Organovo is doing now. 

Could Organovo eventually enjoy as much success as Amgen has? Maybe. The potential for the company's 3D bioprinted tissues is significant. That's especially true in the area of therapeutic tissues. One day, Organovo just might build tissues for use in surgical therapy and transplantation.

Admittedly, that day is still well in the future -- if it ever comes. Organovo remains a tiny company with a highly volatile stock. But collaborating with a big biotech like Amgen seems like a step in the right direction -- even if costs a little. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Organovo Holdings, Inc. Stock Quote
Organovo Holdings, Inc.
$2.99 (0.34%) $0.01
Amgen Inc. Stock Quote
Amgen Inc.
$248.73 (-0.74%) $-1.85

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.